Tenaris SA
MIL:TEN
Tenaris SA
In the sprawling global theater of energy, Tenaris SA emerges as a titan that seamlessly marries industrial prowess with technological finesse. Born in the heart of the steel industry, the company has positioned itself as a crucial player in the production and supply of seamless steel pipes—critical components in the oil and gas sector. Through a strategic web of manufacturing facilities and service centers spread across continents, from the Americas to Europe and Asia, Tenaris orchestrates the delivery of high-quality tubular products that cater to the ever-complex needs of its clients. These clients include oil and gas giants who demand reliability and durability in extreme conditions, both offshore and on land. By leveraging decades of technical expertise, continuous research, and development, Tenaris not only meets but anticipates industry needs, cultivating strong partnerships and a reputation for excellence.
Beyond merely producing tubular goods, Tenaris distinguishes itself through its commitment to providing integrated services that enhance operational efficiencies. Its offerings extend far beyond pipeline manufacture, encompassing sophisticated supply chain solutions that reduce costs and enhance time-to-market for its customers. By integrating digital technologies, the company supports predictive maintenance and real-time data management, augmenting the performance of its products. This comprehensive approach to customer service bolsters long-term relationships and generates steady revenues through not just sales, but lifecycle services that include consulting, logistical support, and on-site assistance. This dual focus on product innovation and service-enhancement ensures that Tenaris remains a pivotal entity in a sector that thrives on precision, endurance, and adaptability.
Earnings Calls
In Q1 2025, Tenaris reported sales of $2.9 billion, a 15% decrease from last year but a 3% increase sequentially, driven by seasonal demand in Canada and U.S. onshore sales. EBITDA improved by 6% with margins slightly up to 24%. Free cash flow reached $647 million, while net cash rose to $4 billion, bolstered by $237 million in share buybacks. However, ongoing U.S. tariffs may add $70 million to quarterly costs over the next three quarters, complicating their margin guidance, which now targets between 20%-25%. A potential slowdown in demand due to low oil prices is anticipated, especially in U.S. shale drilling.
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Good day, and thank you for standing by. Welcome to the Tenaris First Quarter 2025 Earnings Call. to. [Operator Instructions] Please be advised that today's conference is being recorded.
I would now like to turn the conference over to Giovanni Sardagna, Investor Relations Officer. Please go ahead.
Thank you, Liz, and welcome to Tenaris 2025 First Quarter Conference Call. Before we start, I would like to remind you that we will be discussing forward-looking information in the call and that the actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO; Alicia Mondolo, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Guillermo Moreno, newly appointed President of our U.S. operations.
Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our first quarter sales reached $2.9 billion, down 15% year-on-year, but up 3% sequentially due to higher seasonal volumes in Canada and higher onshore sales in the U.S., while our average selling price declined due to market and product mix effects with lower sales of OCTG premium products in Mexico, Turkey and Saudi Arabia, in addition to lower sales of seamless line pipe for offshore projects.
Average selling price in our Tubes operating segment decreased 11% compared to the corresponding quarter of 2024 and 5% sequentially. On a comparable basis, our EBITDA rose 6% and net income remained in line with the results of the previous quarter. Our EBITDA margin increased slightly to 24% due to a good operating performance and better absorption of fixed and semi-fixed costs, thanks to higher volumes. With operating cash flow of $821 million and capital expenditure of $174 million, our free cash flow for the quarter was $647 million.
Following share buybacks of $237 million during the quarter, our net cash position increased to $4 billion, up from $3.6 billion at the end of last year. Now I will ask Paolo to say a few words before we open the call to questions.
Thank you, Giovanni, and good morning to all of you. I will start mentioning the change in our management team, Guillermo Moreno, who is with us on the call today, has taken the position of President of our U.S. operation. Guillermo has more than 35 years of experience in Tenaris. He has led our U.S. commercial operation over the last 5.5 years, prior of which he was President of our Canadian operation. We wish him all the best in his new position.
We began 2025 with a good performance in the first quarter. Not only did we deliver quarter-on-quarter increase in sales and EBITDA on a comparable basis. But our free cash flow rose to $647 million as we achieved a significant reduction in working capital. In Canada, we've been consolidating our Rig Direct strategy with long-term agreements, which have given us more stability and visibility in our operation. This winter season, we shipped a record quarterly volume of OCTG. In the U.S., we have increased deliveries and continue to extend the range of services under our Rig Direct program. These results reflect the value perceived by our customers in working closely with us under long-term agreements as they seek further operational efficiencies. They include most of the largest shale operator, a longer backlog of Tier 1 acreage and the most resilient operation.
In Argentina, we began 5 deliveries for the new Vaca Muerta Sur pipeline, which will add 550,000 barrels a day of additional export capacity and is expected to come into operation next year. As local operators increased their investment in this highly productive shale play, we are expanding our new fracking and coil tubing services -- service unit with an investment in a third set of equipment, which should come into operation next year. Our project backlog offshore project is solid. And we expect to have further opportunities with a new wave of FID that we expect to be sanctioned in 2026.
This backlog is made up of highly differentiated OCTG line pipe connector and coating products. Here, our recent success in qualifying products for high-pressure 20,000 deepwater project in the U.S. with Shell and BP. And the value we bring through the integration of Shawcor coating technology, give us an edge in tackling future challenges. In the coming months, we will supply line pipe for [indiscernible] and Bonga North of [ project ] in West Africa. In Australia, we received a multiyear award from Chevron to supply the backfill wells for Gorgon and Western project in Australia. In the Middle East, we made a record quarterly level of shipment to ADNOC under our long-term service agreement as they started the new shale drilling operation.
We also commenced pipe shipment for a major gas processing facility in Algeria. The major in the region have long-term planning cycles, and we expect that their operation will remain relatively resilient through the year. The last conference call, we mentioned that we were heading for unchartered territories. Subsequent chain of announcement on tariff and counter tariff has not dispelled this uncertainty on the global situation, macroeconomic and geopolitical situation. This has fueled the expectation for a lower level of economic activity and lower demand for oil. Price of oil has been additionally affected by the production increases announced by the OPEC plus. If the price of oil remained near or below $60 per barrel, there will inevitably be slow down in North American shale drilling activity.
While a long-cycle sanction product will likely continue and new project sanctioning may be subject to delays. As we face this less favorable macroeconomic and oil price environment, we are preparing for lower levels of activity ahead. We do so from a position where we expect to demonstrate the resilience and the solidity of our customer portfolio, our flexible industrial and supply chain system and our solid balance sheet. The longer term, the outlook for our industry remains secure in a world where demand for reliable sources of affordable energy will continue to grow.
I will stop here and open the floor for any questions you may have.
[Operator Instructions] Our first question comes from Alessandra Pozzi with Mediobanca.
I think during your opening remarks, you mentioned a potential slowdown in activities in the U.S. I was wondering, are you really seeing companies pulling back on CapEx and what sort of let's say, level of rig count do you expect now by year-end? And you also mentioned that potentially ahead of what could be maybe a slower second half, you may be willing to take some cost-saving initiatives. I was wondering if you can maybe give us more color around that.
Effectively, as you mentioned, I think that the changes that are occurring at the geopolitical and macroeconomic level induce expectation of a lower level of economic activity and also the price of oil and the demand and the price of oil is reflecting this expectation and the announcement by the OPEC plus increasing production. The combined effect, as you can see is a reduction in the price of oil. This -- if the situation has stabilized at the present level, and this is something that may or may not happen because everything has been moving very fast in the last couple of months. Action, counteraction and so on tariff and on different areas have moved many variable.
So if this situation is stabilize and the price of oil remain in this range, the oil company will have to adequate the level of CapEx to the reduced level of cash flow. So we expect that gradually, there will be a reduction in the level of operation as the count, especially in the area and in the project like in the United States, that could be discontinued or postponed with less effort and change. How deep this could be? Well, as we mentioned in our outlook, we do not expect this to impact the second quarter of 2025.
We have a pretty solid backlog. We do not expect let's say, a major change, and we continue to maintain our estimate of the results in line or slightly better than what we had in the first quarter. But when we look at the second half, there is uncertainty, we may estimate the reduction in the level of drilling activity in the U.S. But we are confident that the project worldwide, especially the offshore, but also some of the program of drilling of national company, will continue independently from the change in the price -- in the temporary short-term price of oil. These projects have a rise of 10-, 15-year and are undertaken by a company with strong balance sheet and strong financial capability.
So there is an effect of reduction in activity. We expect this in the world of fields in -- to a larger extent in the U.S. and especially in the U.S. in the oil production because, as you know, the gas is supported by the LNG demand, we do not expect such a reduction in gas. The price of gas also has different dynamics. Canada, considering the drilling activity driven by gas has a larger share is stronger, more than 40%, 45% of the activity is driven by gas.
There could be a reduction, but mostly driven by oil in the second half also. In the rest of the world, we will see if this level of price stabilize and the expectation of the economy remain and the lever or get worst, there could be postponement of long-term projects that may be launched in 2026, but this is too early to say. So this is -- there is a high degree of uncertainty if we look at the second half on and into 2026.
And I mean, if we look beyond the Q1 -- Q2 and is there any visibility at the moment for Q3? Do you think potentially, the lower oil prices could impact Q3? Or is it too early or do you have a view on how they could shape up?
As I said before, if the price of oil remain at the present level, around or below $60, gradually the CapEx of the oil company may be reduced, and we will see the first effect in Q3. But as I say, still we have high uncertainty on the evolution of the main variable. Everything is on the move. But if the oil stay there, we will start to see reduction in activity, in my view in the third Q of 2025.
Our next question comes from Arun Jayaram with JPMorgan.
Paolo, I was wondering if you could maybe give us your updated views on how the implementation of U.S. tariffs and steel is impacting or will impact your operating results. Obviously, we've seen some improvement in price in terms of the Pipe Logix indices. And maybe you could also highlight if you've seen any changes in imports to the U.S. just as the Section 232 quotas have been removed as part of the implementation of U.S. tariffs.
Well, tariff, as you know, the 232 appliance to steel is today affecting in part our operation for our import of steel and some import of pipe into the U.S., even if we produce almost all of our pipes in the U.S., but we still are importing some of the steel bars that goes to our plant in Bay City on average. We estimate the impact of this in the range of $70 million per quarter of additional tariff on one side. On the other side, as you mentioned, the Pipe Logix has been moving up, and we consider that all in all, the price increase that we will see reflect gradually in our contract in the U.S. will offset this increase in tariff.
I think this is basically the trend, what we can expect. I would like to have Guillermo that is living through this to add some comment before going a little more deep into this. One brief mention on import that you were asking for. In the first quarter, import, there has been a higher level of import compared to the previous quarter. Some of this has been in anticipation of the coming tariff by an importer. They decided to raise the level of input at this point. This happened not only in our sector but also in other areas of the economy. There has been an increase in the stocking -- in the stocks in the entire economy in the expectation of tariff. But we will see depending on the negotiation on the way, also how this will evolve coming quarter. But I would ask to give Guillermo some additional comment on the situation and the reaction of the client to this environment.
As you said, in the first quarter, we saw an increase of imports after 4 quarters of reduction of import and a destocking of the market. We were expecting a rebound and what this become effective in the first quarter. For the second quarter, we still expect similar level a little bit downwards. And I think that the second half will depend a lot on what happens with activity. However, we expect that the administration will focus on the purpose of the 232, where the objective is to increase the utilization of the domestic industry. With regards to, as you said, about activity, we have a good visibility with our clients because of our Rig Direct. Most of them have not so far announced any drops of rigs. However, they are in the process or analyzing, but we would expect that there will be some adjustments starting in the third half -- sorry, in the second half of the year.
Great. And Paolo, just a clarification. You mentioned $70 million of potential tariff cost impact per quarter, but that would be reflected in your flat EBITDA margin guide already. So it's not affecting your margins per se.
First of all, the $70 million per quarter that I mentioned will come in gradually during the coming 3 quarters. So this will be -- and then this is basically -- will also be reflected in the accounting due to the IFRS gradually. So for different reasons, this is the estimate the running cost that we will have, but we will arrive there gradually because this number are entering into our cost of sales gradually and also because it will depend from our ability to expand production in copper as much as we can reduce import of steel over time.
So it's a broader estimate may materialize in the fourth quarter has an impact in our cost, provided that we are, let's say we are not able to strengthen local production or negotiate because we don't know where the negotiation with Mexico and with Europe may advance, if there are changes in this negotiation, this may turns out into a reduction -- potential reduction of the 25% of the 232 for this specific semis that we are bringing to the state.
Great. And my second question is, Paolo, Giovanni mentioned how the net cash balance of the company has reached $4 billion. So I wanted to get your thoughts on reinvestment opportunities. I believe that you've exhausted your share buyback authorization and thoughts on potentially at the next annual meeting in May for the company to re-up the buyback authorization.
Yes. As you say, we completed the buyback under the authorization that the Board of Directors had in the assembly. One of the points of the agenda is exactly to renew the authorization for a buyback of up to 10% of the outstanding share. And then the new Board of Directors will consider what to do and if to proceed the program that has been carried on since last year.
Our next question comes from David Anderson with Barclays.
Paolo, I certainly recognize all the uncertainty in the second half of the year. But if oil prices just stay where they are and if tariffs don't change from here, I'm just curious how you're seeing volumes in the second half progressing here? I certainly recognize the U.S. is more sensitive to commodity prices. But your Rig Direct model encompasses most of the larger operators, who're probably not going to change the programs too much. and then thinking about the rest of the world in that mix. I wouldn't think volume should fall too much in the second half, but could you potentially just give us a range of kind of outcomes that you think could happen?
I think it's too early to give a prediction of the decision of the oil company. But you are right, in the consideration that our portfolio of clients is mainly consisting of major oil company, company that has large assets in the shale, that are developing their assets on the basis of long-term program. There are taking the decision with medium and long-term horizon are not subject to, let's say, short-term input given by the level of cash flow. So they can plan. So our portfolio is this. We have our own stock in-house to serve this as Rig Direct.
So we expect that whatever decision they may take or whatever the trend in the market our portfolio or client should be more resilient to the rest of the market. This is also other factors that we need to consider. There are components of the supply metrics in the states like import, there may be subject to a renewal of quota or others changes in the negotiation with the different countries that are shipping their pipe to United States. It's true that with the new 232, they have no quota, but they pay the 25%. But I think that the administration will keep a close look at the volume coming from these countries, and we'll consider this in the negotiation. So this is a factor.
The other component of the metrics, supply is also the welded pipe for a local producer. In this moment, the price of hot rolled coils increased very fast since the introduction of tariff. And the Pipe Logix is increasing, but not at the same pace. So there are other components of the supply chain that may be squeezed in this environment and reduce the pressure of supply in an environment of slightly reduced or strongly reducing demand. This we do not know.
A separate question. You mentioned offshore a few times in your remarks. And I was just wondering, within your mix of volumes. Should we expect that offshore component to start growing later this year into 2026. There's a number of offshore developments starting next year, talking about kind of longer programs that shouldn't be affected. I wouldn't think offshore should be impacted here. But I was just wondering if you start to see those volumes coming through your numbers later this year into 2026 and just kind of what you're hearing from your customers in terms of that potential offshore activity in '26?
Before passing to Gabriel, the question for the review of the offshore term landscape, I think to tell you that the overall invoicing that we are getting from the sale of Connect, OCTG line pipe and coating, is very, very, very relevant for Tenaris. So it's a very important component of our overall positioning. Gabriel, can you give a view?
Sure. Indeed, the offshore market, as Paolo was saying is very important for Tenaris. And I would say with a high degree of resilience in an environment of high uncertainty. Tenaris absolute leader in this space. as we mentioned in some of the opening remarks, for example, we have been selected to be the supplier of choice for one of the FIDs -- most recent FIDs in deepwater, which is a Shell Bonga project in Nigeria. Here, we're going to deliver a full supply of subsea pipeline and risers. We will also deliver insulation coating services that we will produce in our coating facility in Port Harcourt in Nigeria. And we're also going to be the leading supplier of OCTG for the 25 wells that are required for this development.
This is one of the main examples of the contracts of the backlog that we have for offshore, which is quite high. This has been an area of strength for Tenaris in 2024 and will be in 2025 and even some of these backlogs into 2026. We don't expect the short-term volatility in oil prices to affect the development of the projects that are already sanctioned. This project have been sanction on a horizon of a long span a decade or more. And also, it is important to mention that many of this deepwater breakevens have been very competitive in the range of 30 or even lower than that. So we expect the offshore to be a very resilient segment for Tenaris into the rest of 2025 and even into 2026.
Our next question comes from Sebastian Erskine with Redburn Atlantic.
The first one, I just had a question on the cost structure. I noticed in the first quarter kind of quite a large 9% sequential step down in unit labor costs. And to a lesser extent on raw materials. Is there anything specific you can flag on that and kind of what we can expect in terms of a quarterly cadence going forward to the end of the year?
Thank you, Sebastian. I think that the -- we have seen a pretty stable evolution of key components, slightly down on the trend for iron ore, scrap went up slightly following the increase in the hot rolled coil in the U.S. But basically, in an environment in which economic growth or the dynamic of the economy is turning more sour, we do not see that we should have a cost impact. On the contrary, if the reason economy slow down some of the world, we should see some reduction from where we are today in our basic import. And then you were mentioning the relevance of labor. As you know, we are in the process of restructuring of some of our operations to increase productivity and to continuously proceed in achieving savings and increasing productivity in our operations. This may have an impact gradually on our -- the overall labor cost in our operation.
And then just a second one on Mexico. I mean the situation sort of appears to have further deteriorated with Pemex sort of growing and supply debt. I mean, could you give us an update on sort of where you see some movement to the upside in that geography? And given some of the commentary of your peers being quite sort of sanguine and negative?
Well, 2 points. On one side, we've been able to reduce our exposure to Pemex to operations that allow us to substantially reduce our exposure and you will see this in the increase in the reduction in our working capital and in the cash flow. On the other side, when we look at the operation of Pemex, I maintain the position that I told you in the last quarter, I mean, the situation of Pemex has been continuously deteriorating. Today, they are arriving at the level of rigs operation that is extremely low. I think we are in the range of 16 rigs and the level of production here in the range of 1,000,600 barrels going to 1 million even lower because there has been, for a few quarter reduction every month of production. It may strive for a while, but it's there.
So Today, the situation is clearly very difficult, but in my view is unsustainable. The government come out and presented a plan for refinancing to some extent, Pemex and designing an energy plan that would bring back resources to Pemex and plan for getting back to drilling and the development of resources. But this is supposed to happen, but we do not know when this plan will materialize. For the time being, we have listened to the President of Mexico and expanding the lines of these plants but we do not see the action in Pemex to implement this yet. But I'm confident that, I mean, Mexico could not leave Pemex in the situation that it is now. And there will be some moment in the coming quarter action following the planning that is being presented.
Our next question comes from Stephen Gengaro with Stifel.
So I had a question about the raw material costs in the U.S. market versus the pricing. And I'm just sort of thinking back to prior periods where when the market was strong enough and raw material costs were higher, I think you generally more than offset the increase. And today, it's a little bit different with the potential for lower activity. How do you think those 2 items balance themselves out in the second half of the year? Like do you think you can you can manage through it to hold margin? Or do you think the input costs in the face of potentially lower demand will be a headwind on margins in the second half of the year?
Frankly, I do not think that our main concern in this moment should come from raw material. The tariff, the change, the retaliation and the uncertainty on the reciprocal tariffs are creating some gap between the price situation within the United States and the pricing in the international market. This is very true for the hot rolled coils to some extent also for the scrap and some raw material. But in this moment, I would say our concern is more the overall level of economic activity and the risk of a recession and some down trend in the overall level of activity. This is more of a concern. Also, we have 5 steel shop operating rolled in the world. Some operating in the states -- 1 in the States, the other in other regions in Latin America, in Europe. And I think we can manage this change in the value and these gaps from the prices internally in the States or outside in the rest of the world.
Also, Tenaris has a highly differentiated product. The raw material have an impact on our overall cost. But it is not the same impact that you may have in companies that are focused on lower value-added product like long or flat product to some extent. So is important, but in this moment, I don't think this is our major concern.
And the other question I wanted to ask about is given the Rig Direct model that's in place, can you just give us a sense for if we do see a reversal in price at all as a result of lower activity. What's sort of the timing on when we would see that start to show up in the numbers? Would it be third quarter? Would it be later just based on sort of the Rig Direct model and sort of the relationships you have with your key customers?
Well, this is a question that is not easy to project in the second half also because of the change in tariffs, the uncertainty on quota, what will the U.S. administration do to limit import into the states. This is a very important factor to determine the dynamic. Up to now, we have seen the Pipe Logix growing slowly, but moving on even this month. Here, maybe Guillermo, you can add some color on the factors that may influence pricing in the medium term.
Yes. As you said, I mean, since the beginning of the year, the prices in the market have increased like 10%. And as you know, and we have discussed in previous calls, because of the formulas of our direct long-term agreements, we have some inertia. So we don't expect any -- in case there is a reduction in the prices. We don't expect any impact in the third quarter. And eventually, it could start to affect to go into our P&L in the fourth. However, I think it's too early to say. As we said before, still have not heard many of our clients a reduction in their activities, though we are expecting them to come out probably with some during maybe May. I think that in 1 month, we'll have a better visibility of their decisions about second half. But I don't see any impact on the contrary. I mean, due to the inertia of our formulas, prices in third quarter would go up because so far, we have seen that increase.
Our next question comes from Derek Podhaizer with Piper Sandler.
Just to kind of wrap up all the conversations around tariffs and the impact on pricing. And obviously, we have an activity outlook that has deteriorated over the last 3 months. But I remember last quarter, you discussed reaching a 25% margin target in the back half of the year. Obviously, we now have this potential activity role in the U.S. But considering the pricing increases, considering the tariffs, we're going to keep an eye on Section 232 quotas. Do you still think 25% EBITDA margin is to look at target for the second half of the year?
Well, I think many things happened between that estimation and today, the changes have been substantial. Today, we are looking at the price of oil in the range of below $60. This, no doubt, will have an impact on us. Still, considering all the factors that we mentioned, stability of our portfolio differentiation in the market that could be most affected by slowdown. I think we should be able to maintain over time, our margin between the 20% and 25%. But will be difficult today to stay at the 25% margin rate with this environment in the second half of this year. But we will still stay, let's say, within the land, this range looking at the environment as it is today.
And then just maybe if we can expand. So the North America revenue was up 10% quarter-over-quarter. I know that includes Mexico, obviously, which is a region that has clearly deteriorated. So surprised to see the strength there. You talked about Canada seasonal recovery, but you also mentioned the increased sales through U.S. Rig Direct. I just wanted to get your take, maybe if we can expand on that. Have you seen maybe a front-loading of budgets as your largest E&P operators look to order steel OCTG ahead of the tariff impact and potentially other impacts that could be coming throughout the year? Just maybe some thoughts on why you had such a strong quarter for North America driven by the U.S. side, just considering Mexico was such a drag.
No. Our business model, we sell in Rig Direct, we invoice directly when they used pipe rig. And today, more than 95% of our clients are operating on this -- this way. So in the end, we are coping very precisely the exact level of operation. There is no room for anticipating stocks in most of our sales. There are maybe line pipe, but also in this, I don't think the company had the space for, let's say, anticipating order. So we are just following -- copying the curve of activity. Our current has been resilient. I mean the level of their operation after consolidation by the different company has, to some extent, be solid.
Now in Canada, we had a record season. I mean, for us, has been a record quarter in the recourse season also for Canada. In Canada, the level of drilling has been high. Our Rig Direct model in Canada is expanding. So also in Canada, we are coping the level of operation. We do not see any anticipation of sales. Now on this ground, we are making our forecast for the second Q and is a positive forecast because we have a portfolio, we have this stability. We can predict, we think, pretty well the combination of volume and price in that region. When we look ahead in the second half of the year, this is much more difficult because the company will recalculate probably during the coming 3, 4 months, and they will maybe reorganize, replan some of the development. And we will see this happening. But probably during the quarter, the second quarter -- at the end of the second quarter, we will understand better the perspective for the second quarter.
We will also better understand if the administration will limit import to some extent. And if the expectation of the economy and the oil will continue to be as they are today, which is let's say, pretty pessimistic point of view for the future.
Our next question comes from Jamie Franklin with Jefferies.
Just a couple of clarifications. So I wanted to come back on costs, firstly. And last year at 2Q results, you gave a target for $200 million cost savings to be realized by 1H, '25. Can you please quantify approximately how much of that has already been recognized as of 1Q '25 results? Secondly, regarding the decline in sales in South America in the quarter. The press release mentions lower prices in Argentina. Could you please just elaborate on that? And any further color you could give us on possible timing of orders in Argentina later this year, please?
Well, on the first point, I think we have been able to capture more than half of the $200 million savings that we planned in the middle of last year. This is coming from different sources, productivity increase, efficiency in our plant, some reorganization of our supply chain to also reduce the cost of input. And we are proceeding, and we expect that this will contribute. In the end, it will contribute to our margin because these savings are getting into our IFRS cost of sales over time, not immediately because this is the logic of it. .
So we will proceed in this sense. And we think we will get the expected reduction by the second -- the end of the second quarter. Talking about Argentina, the overall level of price, what is going down is the mix because we are combining line pipe project and OCTG and in the line pipe project, we have lower level of price for this. These are welded products like the new -- the Vamos line pipe project and so. In the case of the OCTG, we are reflecting the formulas in the majority of our contracts are considering the Pipe Logix as a key factor, 1 of the factors.
There are other -- in some of the contracts, but mainly this will be Pipe Logix. And so for instance, we may see increase of some percentage points in this. There has been a change of mix in Argentina because the rigs in the Vaca Muerta space has been increasing are today in the range of above 43, 44, I think now as they were in the range of 30, 1.5 years ago, I mean 2 years ago. So the increase is there in the Vaca Muerta space. But in the southern part of the country, YPF and the other company has been selling asset, less productive assets to focus on Vaca Muerta, and this has reduced the number of rigs operating in the South.
So when you look at the overall number, you see an increase that appears to be more limited and probably also during the rest of 2025, we will see slight increase in the level of rigs. But in terms of price, I think overall, we will follow the Pipe Logix, and you will see this the price apart from the mix between welded and simple.
Our next question comes from Daniel Thompson with BNP Paribas.
Just a follow-up on the shareholder returns, comments and thinking around the balance sheet. Obviously, the share price has taken a significant step down on the lower oil price environment already. And given your positive longer-term outlook, buybacks could represent one of the most attractive uses of cash here. So I just wondered how the lower share price factors into your thinking on repurchases and the pace of those repurchases that you've demonstrated under the existing program relative to maybe wanting to maintain a more defensive cash balance into the potentially weaker period? And second one is a bit more straightforward, just on the mechanics of any reauthorization. What is the time line between any reauthorization being issued in May and actually beginning with the implementation of the buyback? Are there any subsequent approvals required after that May meeting or not?
Well, as I was saying before, the extension of the utilization of buyback is in the agenda of the General Assembly. We expect it to be approved. Then will be up to the new Board of Directors to consider the different factors, the situation perspective for eventual acquisition, possible use of cash and decide which course of action to take. We will bring all this evidence to the Board. And after the general assembly and the assumption of the new authority in the Board, the Board will consider this and see which is the best use of the cash that we have in the company.
That concludes today's question-and-answer session. I'd like to turn the call back to Giovanni Sardagna for closing remarks.
Thank you, Liz. And well, we would like to thank you all for joining us today in our conference call. Thanks.
This concludes today's conference call. Thank you for participating. You may now disconnect.